Net interest margin continues to decline: Asset restructuring behind Zijin Bank's "stabilizing" first quarterly report

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The financial reports delivered by regional rural commercial banks are often an important window for observing macro credit transmission and micro business adjustments.

On April 24, the latest first-quarter report for 2026 disclosed by Zijin Bank showed a slight increase in revenue and net profit attributable to the parent company for the quarter, at 2.22% and 1.62% respectively.

This stable start essentially serves as a buffer to the pressure on its performance in 2025.

Previously, Zijin Bank experienced a significant performance adjustment in 2025, with annual operating income dropping by 7.72% to 4.118 billion yuan, and net profit attributable to the parent company falling 23.35% year-on-year to 1.244 billion yuan.

Dissecting the surface recovery of revenue and net profit in the first quarter, the core driving force mainly comes from refined cost control, rather than a fundamental reversal in asset yield.

Data shows that in the first quarter of 2026, Zijin Bank’s cost-to-income ratio was substantially compressed to 29.28%, a significant decrease from 36.73% for the entire year of 2025. By reducing management fees and other expenses, Zijin Bank opened up some room for profit growth at the bottom line.

However, the net interest margin, a core indicator of bank performance, remains at the bottom: in 2023, Zijin Bank's net interest margin was 1.59%; in 2024 it fell to 1.42%; and by the end of 2025 it had declined further to 1.13%.

Entering the first quarter of 2026, this indicator narrowed further to 1.08%, and the net interest spread also edged down from 0.97% at the end of last year to 0.96%.

In the current macro environment of an asset shortage combined with a continued decline in LPR, the downward pressure on asset-side yields is significantly greater than the compression of liability-side costs. For example, in 2025, the interest rate for new inclusive small and micro loans fell by a full 87 basis points year-on-year, and the traditional loan-deposit spread is being continuously squeezed.

Behind the pressure on net interest margin is Zijin Bank's proactive and deep structural adjustment on the asset side. The most notable change is that the retail credit business, once a high-yield engine, is undergoing strategic contraction.

From the perspective of loan structure, as of the end of 2024, Zijin Bank's personal loan balance was 41.473 billion yuan, but by the end of 2025 this number had fallen to 33.73 billion yuan, a drop of nearly 19%. Even in the first quarter of 2026, which usually benefits from a “good start” effect in lending, the retail loan balance only inched up to 34.011 billion yuan, with the overall pace of expansion clearly slowing.

In contrast to the prudence in retail business, corporate banking and bill discounting have become the new stabilizers for loan issuance.

At the end of 2025, its balance of corporate loans and advances (including discounting and trade finance) reached 161.177 billion yuan. By the first quarter of 2026, corporate loans alone amounted to 141.785 billion yuan.

This strategy of tilting towards corporate business reflects a defensive approach by regional banks when facing credit risk. Management is proactively reducing reliance on long-tail customer groups that offer high returns but carry relatively higher risk, shifting instead to lower-yield but higher-quality large corporate and bill businesses.

This adjustment in business structure has indeed stabilized the book value of asset quality to a certain extent. At the end of 2025, Zijin Bank's non-performing loan ratio was 1.35%, up 0.11 percentage points from 2024; in the first quarter of 2026, it slightly dropped to 1.34%.

But stable asset quality does not come without a price.

As the “safety cushion” against risk, Zijin Bank’s provision coverage ratio is showing a year-by-year downward trend. This indicator fell from 247.25% in 2023 and 201.44% in 2024 to 180.09% at the end of 2025, and remained at 180.39% in the first quarter of 2026. The lowering of the provision level means that the room to boost profits by releasing provisions in the future is shrinking.

In summary, Zijin Bank is in a period of business restructuring, shifting from the previous model of “scale and sinking” to the current focus of “prudence and defense.” Its weighted average return on net assets declined from 8.42% in 2024 to 6.17% in 2025, and continues to be under pressure in the first quarter of this year, directly reflecting this shift in business logic.

For the market, the slight growth in the first quarter is a positive sign of stabilization, but with no clear inflection point in net interest margin yet and the share of retail assets still being adjusted, the fundamental reshaping still needs time. In the short term, relying on cost compression to release profits is only a phase; how to restore the profit flexibility of core assets in the new macroeconomic cycle remains a challenge that needs to be addressed in actual operations.

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